How To Teach Hicksian Compensation And Duality Using A Spreadsheet Optimizer

Abstract

Principle of duality and numerical calculation of income and substitution effects under Hicksian Compensation are often left out of intermediate microeconomics courses because they require a rigorous calculus based analysis. But these topics are critically important for understanding consumer behavior. In this paper we use excel solver- a spreadsheet optimizer to demonstrate how these topics can be taught in an undergraduate economics class with appropriate rigor but without using calculus. We also demonstrate how our methodology can be applied to Slutsky Compensation and to complex utility functions.